Shareholders of BRF-Brasil Foods SA, the country’s largest foodmaker, named billionaire Abilio Diniz as chairman as the company seeks to revive growth and boost efficiency.
Diniz, chairman of retailer Cia. Brasileira de Distribuicao Grupo Pao de Acucar, was chosen to replace Nildemar Secches, who’s retiring after heading the board since 2007, in a shareholders meeting today in Itajai, Brazil. Shareholders also approved changing the Sao Paulo-based company’s name to BRF SA.
Brasil Foods shareholders are naming Diniz, the driving force behind the Brazilian supermarket industry’s consolidation, to help resume growth after the $3.8 billion takeover of Sadia SA in 2009 led antitrust authorities to demand asset sales. Under Diniz, Brazil’s top retailer Pao de Acucar increased sales 25-fold in two decades and tripled profit margins after 13 takeovers including Extra hypermarkets, Casas Bahia furniture stores and the Ponto Frio consumer electronics chain.
Diniz received support from major shareholders including Banco do Brasil SA employees’s Previ retirement fund and private-equity fund Tarpon Investimentos SA (TRPN3), which own a combined 20.1 percent of Brasil Foods. Petroleo Brasileiro SA workers’ Petros pension fund, which owns a 12.1 percent stake, abstained.
The nomination of Diniz, the son of Pao de Acucar founder Valentim Diniz, has come under attack because he said in February that he planned to remain chairman of both companies. Corporate governance advisers Glass Lewis & Co. last week recommended shareholders vote against Diniz’s appointment because Pao de Acucar is Brasil Foods’ biggest client and the foodmaker is the retailer’s biggest supplier.
Conflicts of Interest
Pao de Acucar’s controlling shareholder Casino Guichard- Perrachon SA has asked Diniz to leave the board to avoid conflicts of interest. The tycoon, who has been the chairman of Pao de Acucar since 2003 after eight years as chief executive officer, said that he has the right to remain the board’s head as part of a 2005 accord with the Saint-Etienne, France-based retailer.
Diniz, in a statement read during the shareholders meeting today, said there’s no impediment to his appointment as Brasil Foods chairman because he doesn’t hold any position in a competitor of the foodmaker.
The billionaire will probably seek acquisitions outside Brazil as the company’s domestic growth is limited by antitrust restrictions, Frederico de Castro, an analyst at Sao Paulo-based Perfin Investimentos, which manages 2.6 billion reais ($1.3 billion) including Brasil Foods shares, said last week.
Brasil Foods Chief Executive Officer Jose Antonio Fay, who has said since 2009 that the foodmaker would seek an international expansion, so far hasn’t made any major acquisition abroad as the company focused on reducing debt from the purchase of Sadia.
The foodmaker reported net income of 562.8 million reais in the fourth quarter, beating the 428.1 million-real average of seven analysts’ estimates compiled by Bloomberg. Sales rose 13 percent from the previous quarter. Earnings before interest, taxes, depreciation and amortization, or Ebitda, have fallen to 8.2 percent of sales in 2012 from 11 percent the previous year.
Diniz became Pao de Acucar’s CEO in 1995 after a family spat over control of the company ended with him winning over his two brothers, according to information on his blog page. Brazil’s largest retailer almost filed for bankruptcy protection in the 1990s, leading him to sell a stake to Casino to cut debt and fund an expansion. In 1989 he was kidnapped and kept hostage for seven days until Brazil’s federal police set him free.
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